Agents Who Submit ‘Love Letters’ Risk Committing a Fair Housing Violation

Until recently it was a common practice for buyers’ agents to submit a “love letter” with their offers, hoping to convince the seller to choose their buyer over others in a bidding war.

That practice has fallen out of favor, however, as doing so might constitute a violation of federal Fair Housing rules as well as of the Realtor Code of Ethics.

Article 10 of the Code includes the following: “Realtors shall not be parties to any plan or agreement to discriminate against a person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity.” Such discrimination is also a state and federal fair housing crime.

It would be hard not to reveal any of the above characteristics in a “love letter,” especially if it contains a photo of the buyer or buyer’s family. But there are other subtleties to consider. One of the sessions at last month’s National Association of Realtors conference was titled, “How to Stay Out of Trouble: Risk Management and the Code of Ethics,” taught by Barbara Betts, a California Realtor who is also a hearing officer for violations of the Code of Ethics.

In her talk, as reported by Inman News, Betts described how risky such letters could be, especially for the seller and listing agent. “Sellers are humans. Even though they are not purposely trying to create a fair housing situation for themselves, they inadvertently are,” she said. “When the seller gets these letters, they get excited to sell the home to someone they feel will fit into their neighborhood, and that’s where there’s a problem.”

The danger is intensified when there are competing love letters. Imagine, for example, that one of the buyers reveals himself to be a single African American who says your home is perfect for him because he is wheelchair-bound, but your seller chose a family with children who liked your home because it’s close to their synagogue. That choice has offered a veritable smorgasbord of fair housing violations that the rejected buyer could mention in a fair housing complaint, and that their broker could cite in a Code of Ethics complaint against the listing agent.

“We need to consider raising fair housing concerns with our buyers,” Betts advises her fellow Realtors. “Don’t read or accept these letters that are drafted by a buyer. Certainly do not give any support or suggestions. As listing agents, we definitely need to discuss the potential liability during the listing interview and not deliver or accept these letters for the seller.”

Betts added, “If the letter is all about ‘I love your home. It’s beautiful. I love how you’ve remodeled it, I promise I won’t tear it down and remodel it,’ there aren’t any fair housing violations in those statements. The second you start talking about family, color, race, religion, marital status, those things instantly become possible fair housing violations.”

For all these reasons, the agents at Golden Real Estate no longer submit or accept “love letters” from buyers. If we receive one, it’s best that we don’t even read it and that we inform the buyer’s agent that we have deleted it.

There are other ways in which Realtors can commit a fair housing violation, perhaps unconsciously. One is the practice known as “steering,” in which an agent recommends different neighborhoods to different buyers based on where they would “fit in” because of their race, color or religion. We must truly be blind to such characteristics and give the same information to all buyers. Fortunately, buyers do their own searching most of the time. As agents, we must show any buyer what they want to see without comment of any kind.

When a buyer from out of town asks us to describe our neighborhoods, it’s best to avoid all demographic descriptions, limiting ourselves to describing the housing stock, price range, etc. We must not provide such information with an intention to steer them based on their profile.

Meanwhile, sellers expect us to show their homes only to qualified buyers, but if we ask some buyers but not others to be pre-qualified by a trusted lender before showing a listing, we open ourselves to possible fair housing complaints.

We’d all like to believe that racism and other kinds of systemic or cultural discrimination are artifacts of the past, but we are more aware than ever that such discrimination exists even within ourselves, hopefully unconsciously. Unconscious or not, we need to realize that beyond being morally wrong, it can get us into serious professional trouble as agents and that it can also put our clients at risk, making it more important than ever that we educate our clients about the risks they could be facing.

Incorporated or Unincorporated? What’s the Difference?

It’s a common misconception that property taxes are lower in unincorporated areas than they are in an incorporated city or town.

Sales taxes are lower in unincorporated areas, since most cities have their own sales tax. If you register a new car in one of those cities with a sales tax, you’ll pay thousands that you wouldn’t pay registering it in an unincorporated area.

Property taxes are another matter. Take the City of Golden, for example. The mill levy for the city is 12.34 mills. Here’s the full mill levy for such a home:

If you have a Golden address but are not within the city itself, you have separate mill levies for county law enforcement, fire protection and quite possibly for water and park districts that can total far more than Golden’s mill levy, which includes all those services. If you’re in a newer subdivision, you could have an additional big mill levy for a “metropolitan tax district” which was created by the developer to pay for infrastructure. Here’s the mill levy for a home in Table Rock, that subdivision on the north slope of North Table Mountain, which does have a metro tax district:

Newly Remodeled Home with Cottage in Cedaredge

Just listed by Kim Taylor – $229,000

More and more metro area residents are finding an affordable housing alternative on Colorado’s western slope. Located at 155 SW 7th Street in Cedaredge, just off Main street, this  2-bedroom, 1-bath home was completely renovated in 2018 to be the owner’s “forever” home, but life took a turn and now it could be yours. This beautiful 1,348-sq.-ft. home comes complete with a 2-car attached garage, heated breezeway, secluded covered porch, fenced backyard, storage shed and a 453-sf cottage ready to use as extra living space, as an office, or as a rental unit. (It has a full bath and kitchen.) Don’t be deceived by the plain-looking exterior of this home. Find lots of pictures and a walk-through video tour at   www.CedaredgeHome.info, then call your agent or Kim Taylor at 303-304-6678 for a showing. 

Leyden Rock Ranch-Style Home Backs to Open Space

This 4-bedroom, 3-bath ranch home with walkout basement at 19019 W. 88th Drive in Arvada’s Leyden Rock subdivision backs to open space. A former model home, it has lots of upgrades! The main level features an open floor plan with hardwood floors, a 14-foot ceiling in the living room, and floor-to-ceiling windows with stunning views of the Flatirons. The walk-out basement features a family room, full bath, and two bedrooms. It has a 2-car and 3-car garage. The lot backs to open space to the north and east sides of the house, with vacant HOA land to the south. Take a video tour at LeydenRockHome.info. Open Saturday, 11-2.  Listed by Chuck Brown.

Happy Thanksgiving! What We at Golden Real Estate Are Grateful for

Thanksgiving has always been my favorite holiday. I’ve long known the value of practicing gratitude, and Thanksgiving reminds each of us to reflect on our blessings, both individually and as members of our larger communities.

And since these columns are published on Thursdays, it has become a tradition for me to pause on this particular Thursday  to write about my sincere gratitude as an individual, as a husband and step-father, as a Realtor, and as an American.

So, first of all, I’m grateful for having this platform to share with fellow real estate professionals and the general public what I know (and continue to learn) about real estate. Yes, I pay for it, but I have been rewarded greatly for the effort, both in terms of financial gain from the business it generates for me and my broker associates, and by the satisfaction it gives me from indulging in my first and favorite profession, journalism.

To be political for just a moment — and it’s sad to think this is political — I’m grateful for the mainstream media which has weathered four years of assault without forsaking journalistic standards. A free press is essential to our democracy, speaking truth to power unflinchingly.

Naturally, all of us at Golden Real Estate are grateful for those buyers and sellers who have entrusted us with their real estate needs. We know that the sale or purchase of a home is often our clients’ biggest single financial transaction, and we don’t take that responsibility lightly.

Real estate is an interesting profession. For most of us, it was not our first profession. In my case, I didn’t even think of becoming a real estate agent until my 50s. When I earned my license, I discovered several interesting facts about the profession, including that the median age of licensees was my age at the time, 54.

I also learned that it takes several years to become successful in real estate and that the average real estate agent has only two or three closings a year, not enough to make a good living. The majority of new agents give up in their first or second year, having wasted money they could ill afford to lose on software, signs, advertising, licensing and association fees, errors and omissions insurance and more.

I’m grateful when I have the opportunity to educate prospective agents about the difficulty of breaking into this profession and can save them the heartbreak of a lost year or two. But I’m also grateful when I am able to help our own broker associates succeed through the leads this column, our website, and our social media attract for us. As broker/owner, I also serve as a mentor and advisor to them, which I find quite satisfying.

I’m grateful for our MLS (Multiple Listing Service), REcolorado, which has made terrific strides toward being one of the best MLSs in the nation. I’m privileged to represent the Denver Metro Association of Realtors (DMAR) on the Rules & Regulations Committee, providing me with insights I’m then able to share in this space.

DMAR, too, has made great strides under its long-time executive director, Ann Turner. I’m grateful to her and the many Realtors who volunteer on DMAR committees, contributing to the high ethics and professionalism of our industry.

Not all real estate agents are members of the Realtor association, but they all benefit from the work that these associations do. We can all be grateful for the work of the National Association of Realtors, to which all the local Realtor associations belong. From its Washington, DC, office, it lobbies Congress to protect property rights and to fend off legislation that is harmful to our profession and in turn to all property owners.

NAR Agrees to More Transparency re: Buyer Agent Commissions

Last week, the Department of Justice simultaneously sued and settled with the National Association of Realtors regarding how brokers representing buyers are compensated and the public disclosure of that information.

As you may know — because I have written about it many times — the seller typically pays the commission of both the listing agent and the agent representing the buyer. The standard listing agreement includes the total commission and specifies how much of that commission will be shared with a buyer’s agent.

In that listing agreement, the total commission typically ranges from 5 to 6 percent, but the amount of that commission that is offered to buyers’ agents is traditionally 2.8% in our market. Our office policy at Golden Real Estate, like that of many brokerages, requires our agents to offer no less than 2.8%, because it has been demonstrated that offering less than 2.8% can result in fewer showings our listings.

Currently, that “co-op” commission is not displayed on consumer-facing MLS websites, but the settlement requires that it be displayed starting in January. Also, agents will be forbidden to tell buyers that their services are “free” or at “no cost to the buyer,” on the premise that the cost of that commission is reflected in the purchase price paid by the buyer.

Under the settlement, brokers who display MLS listings on their websites may not filter out listings which offer less than a specified co-op commission. We have never done that on our website, www.GoldenRealEstate.com

Lastly, the settlement requires that lockbox access be provided to licensed agents who are not members of the same MLS, an issue I have never encountered.

NAR President Apologizes for Past Racist Practices

On his first day as president of the National Association of Realtors, Charlie Oppler said NAR will continue to advocate for equality and inclusion in real estate, and he apologized for NAR policies in the 1900s that contributed to discrimination and racial inequality.

Oppler spoke during the Diversity and Inclusion Summit, issuing a sobering message that sets the tone for his priorities as president of the 1.4-million member organization. “What Realtors did was an outrage to our morals and our ideals.” said Oppler. “It was a betrayal of our commitment to fairness and equality. I’m here today, as the president of the National Association of Realtors, to say we were wrong.”

“We can’t go back to fix the mistakes of the past,” Oppler continued. “But we can look at this problem squarely in the eye. And we can finally say, on behalf of our industry, that what Realtors did was shameful, and we are sorry.”

Oppler recognized the fact that “words aren’t enough,” emphasizing that the association and all Realtors should take “positive action to remedy decades’ worth of inequality.”

We at Golden Real Estate applaud Oppler for his strong statement on this subject.

Click here to read the full NAR press release.

Enjoy the ‘New Urbanism’ of Belmar in this 2-BR Condo!

This 2nd floor condo in Belmar Plaza, recently vacated by it elderly owners, is ready for you to see. You’ll love its central location, in easy walking distance to everything that makes Belmar great! Check out this video tour and then call your agent or Jim Smith at 303-525-1851 for a private showing!

Biden Presidency Will Bring Renewed Focus on Affordable Housing and Discrimination

As you’d expect from any Democratic administration, there will be an increased focus on middle class and low income communities’ needs in the Biden administration, and that includes housing policy.

Back in February, after losing the Iowa caucuses and the New Hampshire primary, and prior to the South Carolina primary, Biden released a $640 billion housing plan, focused primarily on increasing home ownership among Americans. Among other things, it included a $15,000 tax credit for first-time home buyers that could be used as part of the down payment at time of purchase. 

“People vote based on their pocketbooks, and you don’t get a bigger pocketbook issue than housing,” realtor.com’s chief economist Danielle Hale said. “For many, [housing] is the largest monthly expense that they have. And if you own a home, it’s likely the most valuable thing that you own.”

According to Clare Trapasso’s article on realtor.com, Biden’s plan also includes down payment assistance for teachers and first responders plus changes in the appraisal process to address racial disparities. The down payment assistance, however, would be conditioned on purchasing in targeted low-income areas in need of investment.

It has long been understood that home ownership is central to building family wealth, supported statistically by the Federal Reserve’s Survey of Consumer Finances. The report covering the period 2013-2016 showed that during that period the median net worth of homeowners rose by 15% to $231,400, while the median net worth of renters fell by 5% to only $5,200.  In other words, as of 2016, homeowners’ median net worth was 44.5 times that of renters.

A new 3-year survey covering the period 2016 to 2019 was released in September.

As you’d expect, there’s a racial component to the homeownership divide. According to Svenja Gudell, chief economist of Zillow Group, nearly 75% of white households own their own home, while less than half of black and Hispanic households are homeowners.

Although redlining of low-income communities, which was promoted by the FHA from its inception in 1934, was outlawed by the 1968 Fair Housing Act, the damage had been done, and it will be hard for any administration to undo it. We are just beginning to understand the problem and how to solve it.

The Biden plan also includes increased funding of Section 8 vouchers for low-income renters. At present, there’s only enough Section 8 funding to meet 25% of the demand. The plan would also prohibit landlords from discriminating against prospective tenants using Section 8 vouchers, and would provide legal assistance to tenants facing eviction.

The most progressive element of Biden’s plan may be his proposal to provide a tax credit so that no renter pays more than 30% of his/her income toward rent, estimated to cost $5 billion/year.

The plan speaks about appraisal reform, aiming to create a national standard to assure that homes in minority communities are appraised for the same as homes in comparable white communities, but that defies the core principle of appraisal — that a home is worth what a willing arms-length buyer will pay for it.

According to the realtor.com article, the Biden plan promotes the creation of a public credit agency that would take into consideration a positive history of payment of rent and utility bills, providing a higher credit score that could help renters qualify for a home mortgage.

Not mentioned in the realtor.com article about Biden’s housing plan is the president-elect’s promise to undo the elements of Trump’s tax law which favored the wealthy. However, one provision actually harmed the wealthy who live in states with high property taxes, many of which, coincidentally, voted for Hilary Clinton.

That was the provision regarding SALT — State and Local Taxes, composed primarily of real estate taxes and income tax. It limited the deduction of those taxes to $10,000 per year. I suspect that this element of the tax code will be changed under the Biden administration.

The Trump tax law also doubled the standard deduction to $24,000, which eliminated for many the benefit of charitable donations. I, for one, thought this would spell doom for many non-profit organizations, although Giving USA re-ports that donations by individuals fell only 3.4% in 2018. That’s remarkable, given that the number of taxpayers who itemized deductions fell that year to 18 million, from 46.5 million the year before, according to the Joint Committee on Taxation (per accountingtoday.com).

Those of us who are into sustainability and fighting climate change can expect the new administration to incentivize energy efficiency improvements and building codes through tax credits and grants. When Trump took office, there was a lot of concern in Golden and Jeffco that the Department of Energy, whose secretary had advocated abolishing the department until he learned it was responsible for America’s nuclear arsenal, would defund the National Renewable Energy Laboratory, but funding was actually increased by Congress. We can expect that a Biden administration will provide even greater funding to NREL, energy efficiency, sustainability and the electrification of transportation.

Biden’s February housing plan does address this issue, with the goal of cutting the carbon footprint of buildings by 50% by 2035, and providing incentives to home owners who retrofit their homes to be more energy efficient and more solar powered.

We Help Buyers and Sellers With the High Cost of Moving

If you’ve ever paid a moving company to move your furniture and other belongings to a new home, you know it can be very expensive. We’re talking thousands of dollars, even for a local move.

I have always felt that our clients deserve something more than a fruit basket or bottle of champagne at closing, so I continue to look for ways we can add value to each buyer or seller relationship. 

I bought our first moving truck in 2003 and our second truck (a former Penske rental shown here) in 2017. Together those trucks have logged 200,000+ free miles for our clients, who would have spent $200,000 or more on mileage fees alone if they had rented a similar truck from U-Haul.

   When a client uses us for two transactions — to sell their current home and buy their replacement home within a 50-mile radius — I not only reduce the commission charged to sell their current home, but I hire the laborers to drive the truck and to load and unload it — using boxes we provide free!